More firms closing down than starting up

More businesses are closing down than starting up for the first time in over a decade, with transport and storage firms being worst hit.

More businesses are closing down than starting up for the first time in 12 years.

Figures from the Office for National Statistics reveal that closures hit 345,000 last year, meaning that 11.8 per cent of all active businesses shut in 2022. That’s an increase from 11.2 per cent in 2021 and the highest since 2019 (namely the financial crisis) when rates were also at 11.8 per cent.

Before we go on, it’s worth noting that this is defined by business birth rate (the number of businesses that had either turnover or employment at any time during the period measured) versus business death rate (the number of active businesses that closed).

The number of businesses births fell by 7 per cent, from 364,000 to 337,000, between 2021 and 2022. The business birth rate mirrors the low in 2020, during the height of the pandemic and lockdowns. 

Transport and storage firms were the worst affected, with 23.8 per cent of businesses in this sector closing down between 2021 and 2022. The lowest death rate was in property at 7.1 per cent. The East Midlands had the highest business death rate in the UK at 13.2 per cent.

A combination of high energy costs, increased supplier prices and lower consumer spending were all contributors in the closures.

The increase of the Bank of England base rate has increased to 5.25 per cent, putting further strain on businesses. Conditions could potentially be made worse by 2023’s Autumn Statement which includes a rise in the National Living Wage to £11.44 per hour.

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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